WHAT ARE THE ADVANTAGES/DISADVANTAGES FOR EACH MORTGAGE TERM?
30 Year Mortgage: This term is good for those that want to keep their monthly payment low. Keep in mind the older we get the longer we’ll need to work to pay this long term loan off. This can be a disadvantage to those that want to own their home free and clear and enjoy their retirement years.
20 Year Mortgage: This loan term can offer you a lower payment than that of the 15 year term but the int
erest rate is not much lower than that of a 30 year term. The 20 year term may suit those that are not comfortable being locked in to the 15 year payment but like the shorter term.
15 Year Mortgage : This term has lower rates than that of a 20 and 30 year. Advantages of cutting the term in half can save you money in interest paid over the life of the loan and if you were a first time home owner at 30 you will be mortgage free at age 45. Disadvantages means you’ll need to buckle down now and make higher monthly payments.
ARM loans (Adjustable-rate mortgage): This loan term may be beneficial to purchasing/refinancing a home that do not intent to own for long, or if you intend to refinance within a year or two. These loans start with a lower interest rate but will change once the short term fixed rate has expired. When considering this loan you understand that the interest rate will change periodically and it is tied to an index making your payments unpredictable. Always ask your lender to give you information on just how high your payments could be.
Considering all options before you lock in your term will give you the greatest satisfaction once your loan process is done.
By: Tris Martin
Loan processor at boxhomeloans